If I had just one more word, it would be 'currency' - because reported figures (the warts-and-all pre-tax profits and EPS that we publish in our results tables) have been severely scarred by the relative strength of sterling.
I'm not too worried by this, though. As I've argued before, such effects are mostly translational; a sterling reporting company selling European-made goods and services in Europe has to sell more to report flat turnover, but costs are similarly currency-affected and the impact on profit should be negligible. And they'll receive a reporting benefit in the future should sterling weaken again, which the theory of mean reversion suggests will happen (and which no amount of central bank tinkering will ultimately prevent). In short, it should all balance itself out in the end with no major consequence to the creation of long-term shareholder value.
However, one reader has taken me to task for my somewhat blasé view, arguing that for those UK exporters that incur costs in sterling - say, a company selling UK-made products to Europe - the effect is transactional and does impact profitability, especially if the exporter cannot put prices up to compensate. He, and many others, blame sterling's strength for the steady demise of UK manufacturing.
Actually, it's easy to argue that sterling isn't overvalued - one only needs to look at the Bank of England's most recent trade-weighted index to see that. And if it is stronger than it was a year ago, that's simply because of its ongoing recovery since it was decimated during the credit crunch - as an importing nation, that was a much more painful experience than the relative strength of sterling today.
As for the demise of manufacturing, many other factors are at play. We have become a service economy partly because other countries can undercut us on manufacturing costs - on the basis of wage costs, not exchange rates. It is a race to the bottom best avoided. In fact, our export economy is far from dead, just more focused on higher-value manufacturing and service segments underpinned by world-leading intellectual property and expertise - by nature these should be less price-sensitive than widget-making.
So, as you survey the results landscape, I'd suggest you're on the lookout for such companies, which are able to set the price for the ideas they have rather than take a price for the low-value goods they produce. Such companies will transcend exchange rates.
